Industry for the future

November 03, 2003|By Arthur Fletcher

JUST BELOW the surface of the national debate over the decline in U.S. manufacturing, a dangerous notion is taking hold: Some economists are beginning to argue that America has entered a post-industrial age.

Forget about manufacturing, they say, and concentrate resources on the knowledge and service sectors.

But such views ignore our economy's critical dependence on manufacturing productivity as its engine for economic growth. Manufactured goods have always been the vital center of our nation's trade and prosperity.

To the extent that production passes to foreign manufacturers, or even to America's own companies operating abroad, we pay a price in lost investment, lost factories and lost jobs.

It's no secret that we've lost more than 2.7 million manufacturing jobs in the past three years, largely due to international competition - jobs that pay substantially more than service jobs and provide better benefits. But how to revive America's industrial base and stem the tide of foreign imports?

The key is innovation and education. In the changing environment for manufacturing, it is industries that make use of advances in applied technology to generate new products and provide their workers with the skills to build them that will succeed. These industries can afford to have the technically sophisticated managers and working people needed to operate new systems. And these forward-looking industries are more likely to survive in the international marketplace.

But job training and advances in technology take time and money. They require a long-term commitment.

Few companies, however, are investing in large-scale, multiyear programs of the sort needed to develop new technologies and products and to retrain factory workers.

Our financial system will not allow large amounts of assets to be tied up for years in order to do the groundwork for major advances that will generate new business and jobs. Companies concentrate on the short term. This is reflected in the downsizing and elimination of research departments in almost every industry. Even giants such as General Electric, IBM and AT&T have shrunk their research and development efforts and concentrated on shorter-term goals.

Worse, the federal government's funding for manufacturing research has declined, especially its support of applied technology. This is shortsighted, and it will seriously harm our national competitiveness.

Much of the rest of the industrialized world took notice and learned a lesson. Today, research-funding organizations in Asia and the European Union encourage "sunrise" industries in high technology, artificial intelligence and genetic engineering. These technologies will be major businesses in the next decades.

And foreign companies, especially in China and Southeast Asia, take responsibility for educating and training their work forces.

In looking for villains that cause our trade deficits, politicians like to blame newly emerging industrialized countries, accusing them of keeping out our goods and, in the case of China and Japan, engaging in currency manipulation. Or they say U.S. companies must spend much more on protecting worker safety and health, controlling pollution and meeting other regulatory standards. "We need a level playing field" is what's often heard.

Many of these issues are real and cannot be ignored if we are to face the problems confronting manufacturers. But it's absurd to say that we're not to blame for most of the foreign trade indebtedness we've accumulated; the fault to a large extent is ours. What will we say when Asian countries start to top the United States in global competition because of their new products and better-educated workers?

Don't get the idea that the United States is helpless. The Europeans and Japanese envy the technological leadership of the Defense Advanced Research Projects Agency, part of the Pentagon, which provided the seed money that led to the creation of many leading-edge technologies, including the Internet.

We have something else that is unique: our network of university research centers and national laboratories. Every industrial country has its laboratories, but ours have extraordinary research and development capabilities and have been the source of technological breakthroughs for many new products, ranging from Internet technology to materials for more efficient engines and machine tools.

If America expects to lead the world into the future, it will have to restore its industrial base. We will need new priorities to recover our international competitiveness. Innovation in manufacturing and worker retraining should top the list. A large-scale commitment in both endeavors could turn America's manufacturing sector in positive directions, away from the approaching cliff.

Arthur Fletcher, a consultant, is former chairman of the National Black Chamber of Commerce.